Selecting an ASP to Streamline Your Purchasing

E-procurement vendors are having a significant impact on the future direction
of application service providers, through the continued development of technologies
aimed at unifying the sell-side and buy-side of organizations' e-business investments.
The focus of this article is on how best to benefit from the developments Ariba
and CommerceOne are making with regard to technologies for opening up the sell-side
functionalities available for expanding shared markets.

While there's much focus on how to maximize the sales of products over the
Internet through sell-side strategies, the savings attributable to automating
transactions and creating more efficient links with suppliers has grown exponentially
throughout the last five years. The fact that Ariba
doesn't charge buyers or suppliers to enroll in their Ariba Commerce Services
Network, and has over 10 million products represented online, shows how powerful
e-procurement initiatives can be. With the recent acquisition of Agile
Software, Ariba is quickly moving to a more comprehensive suite of applications,
all included in the Value Chain Management (VCM) initiative. What's significant
about this recent announcement by Ariba is that, instead of taking the acquisition
as one of the many initiatives underway in the company, senior executives insist
that VCM is going to be the dominant direction of the company going forward.
With i2 Technologies going directly
into the Ariba customers, look to see Ariba's VCM focus quickly on an integrated
product roadmap for countering the growing strength of i2 in selected customers.
Clearly the Ariba acquisition strategies will continue to focus on driving greater
sustainable differentiation into the VCM initiative that was just announced
in February, 2001. Ariba will continue to drive buyers and suppliers to its
Ariba Commerce Services Network, as over 10 million products are already listed
there, and the content is going to increasingly be transferable to sell-side
e-commerce vendors. Blue Martini is the first company to take advantage of the
content, with an adapter that's discussed later in this article.

The role of CommerceOne continues to be one of quickly and thoroughly building
partnerships with sell-side vendors. Their focus on taking their roundtrip technology
and propagating it to key vendors on the sell-side makes their efforts equally
important to consider when selecting an ASP. Be sure to check whether the sell-side
vendors you're working with for any e-business initiative have at least heard
of and are working toward a partnership that includes roundtrip technology.

Ariba sees the VCM initiative as the singular focus for their company going
forward. Briefly, here are the key messages of the initiative that Ariba announced
in February:

New extensions to the Ariba Commerce Services Network™ to support
a broader range of direct materials transactions

A comprehensive product and integration roadmap that include solutions
from Agile Software Corporation (NASDAQ: AGIL), based on approval of the
acquisition by the Securities and Exchange Commission

In the first week of March, i2 Technologies in turn acquired RightWorks,
a leading e-procurement applications vendor. What once was a triad of Ariba,
i2, and IBM is over, as Ariba is making obvious by its exclusion of i2 in its
press releases and events—now featuring only Ariba and IBM. In response,
i2 is quickly moving to aggressively position their TradeMatrix Network Platform's
e-procurement features. The focus from i2 is going to be on the customer-facing
processes on the one hand, and deepening the procurement functionality they've
been able to develop on the other.

The Ariba/Agile acquisition is going to bring even greater focus onto the ASP
model and its implications for both small businesses and the Global 2500. The
intent of this article is to define how you can make the best possible decisions
for selecting an ASP for outsourcing your purchasing and e-procurement needs.
The fact that both Ariba and CommerceOne are actively driving to develop their
own e-marketplaces—at no charge to the participants involved—shows the
depth of commitment to the concept of creating content that can be used in a
many-to-many model, uniting both buyers and sellers.

Ariba, CommerceOne, and the Future of E-Procurement
with ASPs

Of the leading companies that are credited with bringing e-business to the
Global 2500 in the last three years, Ariba is dominant. Yet, today, Ariba is
battling with their once-strong partner i2, which will result in Ariba going
even more aggressively in the direction of their Value Chain Management (VCM)
initiative. The real purpose of the VCM is to tie together the Agile acquisition
and show decisiveness in creating a unified product roadmap, in addition to
driving greater value into the Ariba Commerce Services Network (ACSN). Ariba's
partnership efforts are driving toward the sell-side as well; their relationship
with Comergent shows great promise. The ability of Ariba to deliver punch-in/punch-out
technology with their partners is evidence of a broader interest in creating
a more sustainable value base in all Ariba applications going forward. CommerceOne
is equally focused on their round-trip technology, and is equally adept at recruiting
sell-side vendors.

Today, companies responsible for building the technologies to deliver e-commerce
site-enabling software have broader choices of interlinking with their e-procurement
counterparts. This flexibility is so strong in the sell-side of e-commerce that
it's an imperative to look for when working with ASPs who will be hosting your
site. The reason this is so important is that the commitment to providing procurement-side
access for transactions and the opportunity to tie back to an e-procurement
system when the opportunity presents itself in your business model is crucial
to developing a cohesive e-business strategy. The key metrics of business going
into 2002 and beyond will be how efficient the fulfillment process is for companies
serving both their supply chains and end customers. The focus on unifying sell-side
and e-procurement will be the single largest trend in Web-enabled applications
throughout 2002 to 2005.

Both Ariba and CommerceOne are setting the stage for driving greater value
into the sell-side e-commerce vendors' applications. Think of a unified strategy
for both ordering and replenishment of hot-selling products—suddenly you
can create an e-business ecosystem that self-regulates through purchasing driving
response times. Forget about the concept of precision demand forecasting—it's
important, yes, but what's critical over and above forecasting is the ability
to respond. That's the true revolutionary contribution of Ariba and CommerceOne—the
focus on being part of a larger, heterogeneous, yet more connected set of applications.

What makes the focus from Ariba and CommerceOne so relevant to the ASP model
is that their actions in turn can have a major positive effect on where you
go with your relationships with ASPs. Consider these points when working with
ASPs even on your sell-side applications:

Ariba's punch-in/punch-out and CommerceOne's roundtrip technologies
are clear winners. Be sure when qualifying an ASP who is building an
e-commerce site that their applications are capable of handling either or
both of these approaches to getting procurement information. It's very important
to delve into this aspect of an e-commerce application, as the world is
quickly moving to a more unified approach to handling transactions. Chances
are that your ASP is not actively developing these technologies, but rather
is relying on a third-party software company to provide this functionality.
Don't just settle for a promise of this technology in the future; some companies
are delivering one or the other of these approaches today with their applications—Comergent,
NetVendor, Haht
Commerce, Ironside
Technologies, and several others.

Think beyond MRO to the supply chain in your business. The standard
items you purchase for your company are handled just as easily over the
Staples Web site, for example. The MRO purchases is what any ASP providing
e-procurement applications needs to provide, at a minimum. The focus on
delivering the advanced procurement features necessary for handling supply-chain
transactions is one of the best measures of an ASP's ability to scale to
the needs of procurement organizations.

Metrics, metrics, metrics. The world of the ASP has been dominated
by hype and overcommitment for long enough. You need to insist that the
ASPs you're considering for both e-commerce and procurement tasks have the
ability to report metrics and define just how successful their customers
have been at being responsive to the needs of the channel members—and
even internal clients served. The need for driving a business based on metrics
cannot be overstated; you need to build the measurement of metrics into
the contract.

Look for Ariba and CommerceOne to build content sharing with e-commerce
vendors next. This is another great reason to qualify the e-commerce
vendors you deal with—to make sure that they at least have either the
CommerceOne roundtrip or the Ariba punch-in/punch-out compatibility already
included in their sell-side applications. The next step in the progression
of this functionality is the development of content-sharing approaches.
Blue Martini just this week announced their Adapter for CommerceOne, enabling
Blue Martini's catalog vendors to move content from the catalog into CommerceOne
marketplaces and vice versa. This is a development indicative of a longer-range
trend and shouldn't be ignored, but rather embraced as the future of interoperability
between e-commerce and procurement vendors.

Look for the ASP to be a business partner. This is a critical aspect
of bringing in an ASP for any work. The fact that the ASP consolidation
is now in full progress means that many are looking to differentiate themselves
through enhanced services. If your ASP is just clinging to a Service Level
Agreement (SLA) and not willing to extend services and contributions past
that, continue looking. ASPs who are growing and continuing to add customers
to their base consider SLAs just the starting point.